10 January 2020, A violent 2020 GOLD SILVER start, ending little changed

Gold/US Dollar, Silver/USD, Gold/Silver Ratio
A rather violent start to the year in financial markets. A full $50 up and down swing in the Gold price, $1 in the price of Silver, a dramatic 10% swing in the price of Oil (again), whilst stock markets showed a much milder reaction quickly followed by a resumption of the unstoppable decade long rally. Let’s take a closer look at the technical impact of this heavy action following the turmoil in the Middle East

YEAR-END 2019 COMMENT: The next update will follow at the weekend of January 11. Now, the incredibly eventful and often amazing teens are behind us and the twenties are upon us. Anyone in financial markets must be feeling some anxiety as to what the next decade will bring after a massive 12 year glut of helicopter money for banks with unprecedented repo’s of own stock at massively subsidised interest rate levels. 2019 was an eventful year in financial markets with a few scares across all asset classes and otherwise a very strong all time highs finish in most world equity markets.

Gold/USD	LT-M	MT-W	ST-D
close 10 Jan 2020: 1562 (1523)
Trend	↑ (↑)	↑ (↑)	↓ (↓)
% Risk Weight	83 (84)	72 (55)	65 (95)
Allocation	100% (100%)

Potential bearish divergence Gold risk weight to price is potentially in the making in the Medium Term timeframe. The trend however is still up. Daily has shown bearish divergence and continued in a downtrend. On several occasions the past year we have seen bearish divergence in the Daily time frame. Every time the Longer term time frames remained in uptrends with a big price cushion since the long Gold position was established. Today the market is becoming more vulnerable, potentially, with higher risk weight in Weekly and Monthly but the picture remains the same. The uptrend must have a chance to develop further which includes the Quarterly risk weight, which is high but still up. The Jan 7 daily close at 1595 indicates a potential for the next Gold price objective of 1800.
The Jan 8 reversal day close was not below the previous day’s low, so, even though tempting to realize a profit, we remain fully invested at this point.

Last week:

“Trust in our globally controlled monetary system has taken decades to arrive on foot. That trust will leave on horseback”

Gold has begun to shine again during the last 4 years and this includes central banks embracing the yellow metal again. As we follow the market generally from short term Daily to long term Monthly, for this gold price forecast update we’ve included a chart of gold price and gold risk weight that never really shows up as a piece of analysis equipment in Gold Forecasts and which at times can become very relevant indeed, especially for Long term investors although Medium term investors can also benefit tremendously from this simple extra market analysis tool. It is Gold Risk weight in the Quarterly time frame as shown in the chart below. The Gold risk weight is measured based on the actual highs and lows during the Quarter, although the line price chart only shows the quarter end closing prices for Gold. Gold Risk weight always measures where a market trades relative to its price range. The benefit from using this very long term Gold forecasting tool is that it can create confidence and induces patience. Patience in financial markets is difficult for most investors or traders, although impatience or even ‘panic’ can at times be the right actionable attitude.

So let’s examine the Quarterly Gold chart versus the US Dollar and Risk weight for the period 1971 to 2020 and how can it assist with our Gold price forecast:

The chart above starts the quarter ending Sept 30 1971, Gold had just began an early catch up with reality following the Friday, August 13, 1971, doomsday at Camp David, which preceded ‘the unpeg announcement’ 2 days later on Sunday August 15, 1971. The Gold Standard was ‘No More’.
Interesting observations are:

• The series of lower risk weight tops corresponding to lower price tops between Jan 1980 and Dec 1995
• The Bullish risk weight divergence to price low in 2001
• the 8 years it took from 2003 for the Quarterly risk weight to finally peak in 2012 (the price high of course occurred in Sept 2011, but the technical top coincided with the time of price top against the Euro)
• The absolute unknown as to where prices may go whilst the LT risk weight trend is still advancing

What we can confirm is that in each of the major oversold or overbought conditions on this Quarterly chart over nearl 50 years, the LT Monthly and or MT Weekly either confirmed an imminent reversal or drove the market into strong divergence indicating a continuation of trend. What this type of timeframe analysis does is measure true risk whilst it will hardly ever pick the actual top or bottom. The good thing is though that it always prevents from taking major positions against the risk weight trend. Thus whilst the Quarterly risk weight trend is up we must be patient and accept the short term ebbs and flows of shorter term cycles.

Based on the trend patterns since Dec 2015 we would expect the major players to have accumulated Gold to somewhat higher than average levels as confirmed by the World Gold Council in a recent report , but probably still insufficient given the discrepancy with the extreme level of quantitative easing the past decade. Many ‘friends of gold’ type investors, typically High net worth, have been accumulating as well but Mainstreet remains underinvested as usual until they come in during the final 20% of a major advance. An overbought daily risk weight may pause the current long term rally and the strongly trending Weekly MT should limit a drop in prices.
As for Price objective the only way we know isn’t very good, especially when timing future cyle dates, but at least gives some comfort on the price horizon. Fibonacci ratio’s are just a guidance and we would base it on the entire move from
say 1913 to 2020 whereby the Jan 1980 high is calculated based on the quarterly highest print of 667 coming from $20.67 (1st Gold standard peg). This makes the reversal into the 257 2001 low a near 63% correction. From 257 to the high print of 1776 in 2012 is $1519. That is a Long term advance of 235%, which is also near the Fibonacci 233 sequence number. We usually only know in hindsight whether a Fib ratio is applicable to an achieved price of time objective. So, it always remains highly speculative to choose a reversal point based on Fib alone. Risk weight as we have learned to apply it is a lot more secure and thus gives better comfort and confidence to stay with a trend fully or partially or indeed get out of a market position. Now, based on this Fib ratio alone an objective could be the more extreme objective of 2.62 x the entire move to 2012 = a price target of $4,571 OR even 4.326 times the entire move to 2012 = a price target of $7.549. The only reason why an insane objective makes sense is the insane market background that could easily and quickly generate a massive dive in trust and strong appetite for this type of insurance.

Another interesting observation is the Quarterly Standard deviation as per the chart below:

With a modest quarterly deviation from mean of $105 risk remains well within the maximum margin from entry, and without the typical shorter term risk weight highs being confirmed with a bearish divergence risk weight to price we remain fully invested. No Change.

Silver/USD	LT-M	MT-W	ST-D
close 10 Jan 2020: 18.06 (17.74)
Trend	↑ (↓)	↑ (↑)	↓ (↓)
% Risk Weight	64 (65)	59 (40)	56 (82)
Allocation	100% (100%)

Silver has held its solid uptrend with bearish risk weight to price evident in the Daily time frame. With the 3 long term time frames in uptrend and well below high risk weight levels we are confident that $21 is still in sight. No Change.

Last week:

Silver price 2020 Forecast. Our prediction for 2020 holds

Silver is in a similar position as Gold with one big difference and that is the Risk weight position as shown on the above Silver quarterly analysis chart which we add as a bonus at the start of 2020. We seem to be the only ones in the technical analysis space running this type of Long Term analysis on Silver and Gold and this can be extremely helpful, even in the relatively short term, to retain trust in the position that we’ve taken. There is a massive lag with long term chart and therefore any divergence vis a vis Monthly and Weekly risk weight much be watched carefully. As we know from history and our own experience, market trends, up or down, can last for a very long time. The Long term quarterly Silver risk weight is in an uptrend and, potentially, has a long way to go. This is the type of indicator level that tells us the Gold/Silver Ratio goes to equilibrium and confirms the old adage; ‘Markets ALWAYS return to their equilibrium at some point’. Whilst the quarterly Gold Risk weight has already advanced into the 80’s range, yet in an unmistakable uptrend still, and Silver ending the year 2019 at a risk weight level of just 52, there is a gap in momentum.
The Silver price, for some unknown reason, still shows that underlying hesitation which causes some other social science forecasters, so we’ve read, to even see silver staying at this level whilst gold goes up. A very unlikely scenario in our view and a bet against Silver looks like a suicide mission for that investment. Moving more cash now into physical silver should be excellent insurance over the next several years. We confidently remain fully invested as the MT Weekly sets the more bullish tone and still needs to develop a bearish divergence which we haven’t seen for several years

GOLD/SILVER Ratio	LT-M	MT-W	ST-D
close 10 Jan 2020: 86.05 (84.62)
Trend	↑ (↓)	↓ (↓)	↑ (↑)
% Risk Weight	44 (41)	57 (57)	74 (23)
Allocation	50/50 AU/AG (50/50 AU/AG)

Interim Monthly has turned up, but this is interim and non-conclusive. With Daily risk weight sharply up this week and weekly in down trend we stay with a fully allocated slightly overweight silver position. No Change.

Last week: With the Monthly trend turning down at year-end, the ratio is still favoured to stay weak. No Change.

FX 2020
USD Index, EUR/USD, GBP/USD, USD/JPY, GBP/EUR, Bitcoin

USD Index	LT-M	MT-W	ST-D
close 10 Jan 2020: 97.35 (97.69)
Trend	↓ (↓)	↓ (↓)	↑ (↓)
% Risk Weight	57 (63)	21 (19)	55 (22)
Allocation	100% (100%)

Last week’s monthly risk weight was incorrectly shown at 52 which should have been 63 (corrected). As indicated last week a pause in the down trend was expected and also materialized. This uptrend may continue a little while longer but is likely to meet resistance relatively soon again. Across different technical tools the $Index remains both neutral and vulnerable. The latter determines the policy to stay with a full hedge on long dollar transaction risk exposures.

Last week: The Dollar Index is now more rapidly developing weakness in trend and risk weight. A possible bullish divergence in the daily time frame could cause a pause in the move that started again in September. Given the bearish divergence sequence in the MT weekly between April 2018 and Sept 2019, we’d like to see a serious oversold risk weight coupled with a bullish divergence to start thinking a little firm on the USD. Patience is what we need. This could last for quite some time. No Change.

EUR/USD	LT-M	MT-W	ST-D
close 10 Jan 2020: 1.1113 (1.1213)
Trend	↑ (↑)	↓ (↑)	↓ (↑)
% Risk Weight	30 (33)	75 (76)	30 (82)
Allocation	100% (100%)

Euro has shed one point since Year-end and remains in a Long Term uptrend. Weekly risk weight has turned down slightly from a mild high risk level without risk to price bearish divergence. We remain in the full hedge camp as the technical risk of further dollar weakness is still the primary concern.

Last week: The Euro has been expecting to go stronger and it slowly has. Just before Year-end 2019 EURO broke above 1.12 resistance and closed there. A signal that this move is not over even though there is apparent contra-weight in the market keeping the dollar from falling out of bed. No Change.

GBP/USD (Cable)	LT-M	MT-W	ST-D
close 10 Jan 2020: 1.3040 (1.3250)
Trend	↑ (↑)	↓ (↓)	↓ (↑)
% Risk Weight	70 (71)	66 (70)	47 (45)
Allocation	100% (100%)

The Year-end high finish with the general slightly stronger dollar trend since then and ending the first full week of the year at 1.3037. Cable has not reached a serious top in any of the time frames. No Change.

Last week: Cable remains part of our primary dollar trend and risk weight direction. Last week’s sharp drop from 1.33 to 1.29 was reversed into an equally sharp rally back to 1.3250. No Change.

USD/JPY	LT-M	MT-W	ST-D
close 10 Jan 2020: 109.40 (108.72)
Trend	↑ (↑)	↓ (↓)	↑ (↓)
% Risk Weight	45 (44)	77 (83)	69 (35)
Allocation	50% (50%)

We got the expected downtrend and subsequent rally after new year. As the Daily trend is still up with fairly neutral Weekly and Monthly risk positions we stay with a 50% transaction risk cover. If Daily rolls into a downtrend and weekly continues down we will likely raise the hedge to 100%.

Last week: We shall wait for the minor short term downtrend, and which is quite rapid, to finish before deciding on the next level of allocation. For now we stay with 50% dollar cover of long dollar transaction risk

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GBP/EUR	LT-M	MT-W	ST-D
close 10 Jan 2020: 1.1736 (1.1812)
Trend	↑ (↑)	↓ (↓)	↓ (↑)
% Risk Weight	82 (83)	63 (68)	67 (29)
Allocation	100% (50%)

GBP Euro now looks more vulnerable and we raise the hedge against transaction risk exposure to the full 100%. A decision like this can be fine tuned a bit given that the hourly risk is very low. A minor rally on Monday can expected although this type call should best be executed at market i.e Monday morning latest.

Last week: GBP Euro still does not look like it wants to resume the extraordinary uptrend that was driven by the looming Brexit. Hesitation in LT Monthly trend at near overbought with pressure on Weekly are driving indicators that caution is desired. Our 50% cover for Euro currency based GBP exposure remains. GBP balance sheets to preferably take a larger cover even (70% or more) on short EURO transaction exposures

BITCOIN BTC/USD	LT-M	MT-W	ST-D
close 10 Jan 2020: 8198 (7195)
Trend	↓ (↓)	↑ (↑)	↑ (↓)
% Risk Weight	43 (41)	27 (23)	75 (55)
Allocation	0% (0%)

The 15% rally since Year-end has done little in terms of risk weight. The big wedge made up from connection the 3 year highs and lows is narrowing to a range of ‘just’ $6000. trading smack in the middle. No change for us. This remains a very high risk market dominated by a few players without a clear understanding how source of funds are controlled. Speculators trading through the various exchanges are numerous but relatively small in size. No Change.

Last week: This market is still too young to make any serious long term prediction. I see stuff on the world wide web that just doesn’t make any sense with Long term predictions that simply have no basis for being considered serious. There is zero social science evidence that BTC or any other crypto is going anywhere except that gaps are still likely to be filled, just like any other market and the only gap left is at 2828, in our view. Little volatility last week for a change. If the short term history of Monthly BTC data is anything to go by, there is support at 4560 with upper resistance at 11670. We’ll probably see one of these target reached within a few months and that kind of volatility is not a risk play. So, No Change but we keep following it

Remaining ‘Gap open’ (July 2017) still to fill at 2828. We exclude weekend action to determine opening gaps as major players are(were) not participating in size during weekends.
If this market is poised to turn from extremely overbought (Dec 2017) to completely oversold, it doesn’t appear to be finished.

GLOBAL 2020
S&P500, Brent Crude Oil

Standard & Poor 500	LT-M	MT-W	ST-D
close 10 Jan 2020: 3265 (3219)
Trend	↑ (↑)	↓ (↓)	↑ (↓)
% Risk Weight	97 (96)	95 (96)	86 (83)
Allocation	0% (0%)

Everything Stocks is high risk. Every timeframe from Daily to Quarterly is at a serious high risk overbought level with another bearish divergence developing in the Daily timeframe. No Change.

Last week:

Is S&P500 worth the risk???

A mild correction started right before Year-end 2019 with MT weekly reversing at the same 96% overbought risk level as the previous week.

We stay out of course as nothing points towards a low risk entry. This will take some time to develop if at all within the foreseeable future. What we can expect is that ST Standard deviation is small given the narrow and steady price advance into new highs for many months. Of course not knowing what type of intervention can still take place, the highly profitable year end close could drive some rapid profit taking. This is an extremely high risk market and not for the faint hearted. This kitchen is simply too hot for us. No Change.

Bonus chart: Here is the same Long Term Quarterly Chart for the Dow Jones Industrial Index from 2010 to 2020 including our Risk Weight levels

Brent	LT-M	MT-W	ST-D
close 10 Jan 2020: 66.03 (66.03)
Trend	↑ (↑)	↑ (↑)	↓ (↓)
% Risk Weight	45 (35)	77 (72)	15 (72)
Allocation	0% (0%)

The events leading up to the explosive reactions in Oil prices in early January must have been hard on traders. The market closed slightly below the Year-end level last Friday and we see no technical evidence to change our ‘Stay out’ analysis. The explosive brief price expansion to 71.75 basically created a new high in a narrowing Triangle with support at 58.00 and resistance now at 71.75. Technically the Oil price can develop in either direction and an investment therefore would wisely be delayed until we see a breakout from the narrowing consolidation of the past 16 months. No Change.

Last week: Brent has become a short term play only and is now channeled by a narrowing triangle formation with resistance at 68 and support at 58. LT Monthly is up but hesitant, MT Weekly is strong up by 20 risk points and daily has turned down. This looks like a further pause for finding direction which is hard to predict. If Downtrend resumes we are potentially looking sub 40 with LT resistance at 86.00. We stay out. No Change